Technology Trends Transforming VAT
The world of VAT collection and reclaimation is undergoing a series of technological shifts that may not be visible on the surface but will soon impact how the tax is collected and recorded, and even how VAT fraud is fought. The changes are taking place both on the governmental level and among private industry that seeks to make the VAT system easier for people to navigate.
Some of these technological elements are well into their implementation stages and others are still under consideration. But what they all have in common is a desire to take the complexity out of the VAT process and make it as easy to as possible to pay the tax, file a return for the VAT that can be reclaimed, determine exactly where the tax is applicable, and to keep it as secure as possible.
The following trends in technology will push VAT into new territory in the coming period.
1. Digitization has finally arrived.
The British government has already begun its massive project to remove the paperwork from tax collection. The goal is to eliminate the cumbersome tax return and replace it with an online system that allows people to pay their taxes easily and efficiently, beginning with their VAT dues. With a digital system, it is easier for people and companies to see their tax history in a glance, find out about tax break they might be eligible to receive, and maintain records that can be accessed at any time simply by typing in a name and password.
For those who have long sought a break from the long tax forms and challenges keeping tax records from year to year, digitization is an idea those time has finally come. The UK system promises to serve as a model for other countries. If the system finds an appreciative audience in British public, it will gain enough momentum to spread far and wide.
2. Blockchain makes transactions transparent and traceable…and fraud more difficult.
Blockchain arrived in the public consciousness in recent years as the technology behind Bitcoin, the first digital currency. But even those who have little or no interest in cyrptocurrencies have begun to see the potential blockchain offers in countless other industries. For VAT, experts are looking at ways to apply the technology as a way of fighting VAT fraud.
What makes Bitcoin such a reliable currency even though it is not regulated at all is the way that transactions are recorded. This is the blockchain – a series of blocks containing the information on every transaction that takes place. Exact copies of the chain of blocks are available at every point of the transaction, making it impossible for hackers to enter and change any of the infornation, Even if they manage to change one, it will be easily corrected because of the multiple copies.
While fraud exists on many levels with VAT, digitization will be vulnerable to new levels of digital fraud. But with tools such as blockchain to protect the bottom line and to deter hackers from even trying, more resources will be able to go towards fighting other forms of dishonesty.
3. Artificial Intelligence is turning complex processes into routine procedures
While digitization is in process, and blockchain is under consideration, Artificial Intelligence (AI) is already making a huge impact on the way people do business, including in matters related to VAT.
These new technologies make it easier to automate some of the most challenging tasks. Some jobs, like manually claiming VAT returns from business trips in EU countries, are simply so cumbersome for some companies that they are written off as a sunk cost. That’s why $50 millions in VAT return money is left unclaimed every year. But with AI, the forms only take minutes to complete.
Even better, the AI makes the information usable in other areas as well. The ability to scan receipts turns the VAT return data into an instant expense report that can be used to plan for the next business trip in Europe.
The technology also makes it easier to keep up with the different VAT regimes for all the EU states. Each country in the EU has a different set of criteria for what is returnable and a different filing deadline. Make sure your company gets all of the VAT returns it deserves. For the complete story on recovering VAT in EU countries, download our eBook.